The Gujarat government expects to further attract fresh investment of around Rs5000 crore in the textile sectors across the value chain with it's decision to extend textile policy by a year. The extension is expected to add 300 ginning units, to 1,400, and double the spinning capacity to four million a year, apart from setting up of units in other segments, such as technical textiles, silk, jute and wool.

As under the policy, the state government offers interest subsidy of five percentage points on new plant and machinery (P&M) for value addition, apart from six percent and seven percent for technical textiles and on new P&M for cotton spinning, respectively.

Also, refund of value added tax (VAT) on expansion of existing units from cotton to garments and made-ups, in addition to power rate concession on new investment for cotton spinning at a rupee a unit.

The government also extends financial support of 50 percent (up to Rs 30 crore) for establishing a textile and apparel park, and a maximum of Rs 10 crore for other technical parks.

Siddhartha Rajagopal, executive director, The Cotton Textiles Export Promotion Council said that there has been shifting of units from Tamil Nadu, Telangana and Maharashtra. The extension would see a boost in fresh investment.

The government said that the textile policy implemented in 2013, has attracted around Rs 20,000 crore of investment in four years and created 2.5 million jobs, half to rural women. The government estimates addition till now of a million units of spindle capacity in the spinning sector and setting up of over 1,000 units in technical textiles.

Other states have followed Gujarat's policy to attract flow into this sector. Maharashtra has announced the setting up a number of textile parks in Vidarbha. Tamil Nadu, Andhra and Telangana have also announced incentives for setting up of new textile units. However, Gujarat has an advantage in terms of strategic location near large consumer markets and in ports for export.

According to Rahul Mehta, president, Clothing Manufacturers Association of India, the overall policy was advantageous for attracting investment in the state.

Gujarat has been the largest producer and exporter of cotton in the country, at 33 percent and 60 percent, respectively, of the national total.